Oct. 28 (Bloomberg) -- Deutsche Boerse AG, seeking to acquire NYSE Euronext to form the world’s largest exchange, has “strong arguments at hand” for European antitrust regulators who have sent the companies a statement of objections, Chief Financial Officer Gregor Pottmeyer said.
Deutsche Boerse and NYSE Euronext are defending their proposed $7.26 billion deal at a regulatory hearing in Brussels against European Union criticism that the combination may harm competition and restrict innovation in financial markets. The EU’s antitrust authority can block anti-competitive deals or require companies to sell off units or change the way they do business to eliminate antitrust concerns.
The “impact on competition is negligible,” Pottmeyer said on a conference call today to discuss third-quarter earnings. “Regulatory reform ensures competition between listed and over- the-counter derivatives markets will not only continue, but be invigorated. There is minimal product overlap today between NYSE Euronext and Deutsche Boerse.”
The exchange is confident that the regulators will see the benefit of the deal, he added. Regulators told the exchanges their merger would monopolize derivatives trading in Europe, according to a person familiar with the situation.
The European Commission’s antitrust complaint said that the companies’ trading arms directly compete. This meant it rejected claims by Deutsche Boerse and NYSE Euronext that they aren’t rivals on the grounds that Eurex specializes in longer-term debt products and NYSE Liffe in short-term interest-rate contracts, said the person who couldn’t be named because the EU’s statement of objections is confidential.
The exchange is still seeking to close the deal by the year-end, Pottmeyer said. That deadline is not in the exchange’s control though, he added, as the EU is set to rule only by Dec. 22 and the State of Hesse, Deutsche Boerse’s regulator, will wait for the EU before making its judgment.
Costs related to the deal may rise, Pottmeyer said. The exchange says it spent about 25.5 million euros ($36 million) in the third quarter on “efficiency measures and merger-related costs.”
“I can’t rule out fourth-quarter costs are on the same level as in the third-quarter,” Pottmeyer said.
Deutsche Boerse yesterday raised its forecast for cost saving in 2011 to 130 million euros from 115 million euros. The exchange also said third-quarter earnings before interest and taxes excluding certain items climbed 46 percent to 356.4 million euros. Revenue grew 20 percent to 604.7 million euros.
The company today said trading on its electronic Xetra system jumped 11 percent in October. The number of fixed income, index and U.S. options contracts changing hands on its Eurex futures exchange also increased in October, the company said.
Both Deutsche Boerse and NYSE Euronext yesterday said they will buy back stock before the end of the year. Deutsche Boerse will acquire 100 million euros of its own shares and New York- based NYSE Euronext will repurchase $100 million. NYSE said its buyback will start after it reports third-quarter earnings on Nov. 3.
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